Workforce Transformation in the Digital Vortex Reimagining Work for Digital Business Agility April 2016 Workforce Transformation in the Digital Vortex Key Insights • In today’s turbulent business climate, digital disruptors will displace four in 10 incumbent companies over the next five years, according to the Global Center for Digital Business Transformation (DBT Center), an IMD and Cisco initiative. • In response, many companies focus their transformation efforts on IT and business processes, too often neglecting people. • Changing customer expectations and accelerating disruption demand digital business agility—the capacity of an organization to understand and react to digital threats and opportunities. The workforce is a critical component of digital business agility. • In a DBT Center survey of 941 executives, however, fewer than 10 percent considered their firms’ workforce management to be excellent in three foundational capabilities for digital business agility: Hyperawareness—ability to sense what is going on throughout the enterprise, among its competitors, and in the marketplace. Informed decision-making—using data and analytics to empower the workforce, resulting in better decisions at every level of the organization. Fast execution—responding rapidly once they have made a decision. • To support companies as they transform their workforces, we have identified six “digital accelerators” that blend analytics, mobility, and other technologies to empower people. Digital accelerators give voice to employees’ insights; bring analytics to the point of decision, at all levels; and allocate talent from within the organization and beyond. • Companies with digital business agility in their workforces were three times more likely to characterize their financial performance as “better than average” over the past five years. 2016 Global Center for Digital Business Transformation—An IMD and Cisco Initiative p. i Workforce Transformation in the Digital Vortex Transform Technology and People—or Risk Disruption In an age when technology seemingly reigns supreme, people remain a company’s greatest as- set. Workforce management, however, is among the most vexing challenges facing any organiza- tion. It also presents one of the greatest opportunities. When properly channeled, the collective knowledge and skill of a workforce can drive the next multibillion-dollar market. After all, disruptive technologies and business models are fueled not by algorithms, but by people—innovating, col- laborating, and taking bold chances.1 Unfortunately, many firms with talented and committed employees still cling to a portfolio of un- Authors competitive offerings—and their transformation efforts focus on IT and business processes, while Jeff Loucks neglecting people. As a result, these firms fail to generate the value their customers demand.2 In James Macaulay this paper, we will explore how companies can meet these demands by employing digital busi- ness agility—an organization’s capacity to understand and react to digital threats and opportuni- Andy Noronha ties—to reimagine how their people work. Michael Wade In recent months, the Global Center for Digital Business Transformation (DBT Center), an IMD and Cisco initiative, has explored the challenges of competing in an ever-turbulent Digital Vortex in which business models, offerings, and value chains are digitized to the maximum extent possible. As innovative disruptors drive toward the center of the Vortex, they blur the lines between indus- tries. Digital laggards are swept aside and risk being among the four in 10 companies that will be displaced by disruption in the next five years.3 Our previous paper, “Disruptor and Disrupted: Strategy in the Digital Vortex,” explained how companies must simultaneously battle digital disruptors attacking their core businesses while exploiting new revenue opportunities. To prevent a downward spiral of declining revenues, com- panies must learn to innovate better and faster. This is especially true for incumbents, who can be slowed by the very processes that made them successful in the first place. Incumbents don’t have to be just like startups, however. They can combine their own newfound agility with their traditional strengths—including brand equity, access to capital, and large customer bases. In this way, they can position themselves for great success in the Digital Vortex. 2016 Global Center for Digital Business Transformation—An IMD and Cisco Initiative p. 1 Workforce Transformation in the Digital Vortex This requires the three core capabilities of digital business agility: hyper- awareness, informed decision-making, and fast execution. These ele- ments give organizations the power to anticipate what is coming next, and to act with skill, purpose, and swiftness. Above all, they empower people and transform the workforce to drive new levels of collaboration, innovation, and success for the whole company. Build a Foundation for Digital Business Agility Workforce management is a critical element Figure 1 of any digital transformation effort. Through Digital accelerators in the employee domain our research and customer engagements (see “Our Methodology: Follow the Money and Ask Ubiq ture uito the Experts,” next page), the DBT Center has ap us C A identified six specific “digital accelerators”— ht na ig ly s tic digital tools that apply to workforce manage- In s ment and support the capabilities of digital business agility. These combine people, busi- C o ll ness process change, and technology to give g Informed e n c i er- t s voice to employee insights; apply analytics at i Decision v n e e aareness the point of decision; and identify and allocate D S Digital maing e n c talent to execute those decisions as efficiently r i e s t t Business i o as possible. a n P - - m k r Agilit a o Each of the foundational capabilities that k i n W constitute digital business agility—hyper- g awareness, informed decision-making, and n fast execution—corresponds to two digital ast o A ti g a accelerators (see Figure 1). By implementing i ecution c le o T ll them, companies can take meaningful strides a r A len o t ab toward transforming their workforces to com- Pip t L elin en pete successfully in the Digital Vortex. e Intellig Hyperawareness is a company’s ability to Source: Global Center for Digital Business Transformation, 2016 sense what is going on throughout the enter- prise, among its competitors, and in the marketplace, and to recognize developments and patterns that will impact it. In the case of workforce management, hyperawareness has two key elements: • Collecting information about the internal and external business environment from the workforce. This includes gleaning insights about what customers value from frontline sales associates or account managers; generating ideas for new products from engineers; or capturing frank assessments of corporate strategy 2016 Global Center for Digital Business Transformation—An IMD and Cisco Initiative p. 2 Workforce Transformation in the Digital Vortex and executive decisions from the people who see their effects on a daily basis. To collect the information effectively from a workforce consisting of thousands (even tens of thousands) of employees and Our Methodology: Follow the contractors, companies need a digital accelerator we call insight Money and Ask the Experts capture. These tools blend technologies to give employees a voice To identify the most important through business models that integrate what they say into their digital accelerators of workforce decision-making and execution. transformation, the DBT Center studied • Gaining greater visibility into employees’ goals and activities while the business models of more than 75 helping them meet their challenges safely and efficiently. The digital disruptive startups. We conducted accelerator we call work-pattern sensing gathers and analyzes in-depth interviews with the founders data from sensors, business applications, collaborative tools, and and/or CEOs of 12 of the most other digital sources to understand patterns of how employees innovative companies in the workforce perform their work. It sheds light on the business processes that management space to understand the generate positive outcomes and should be spread throughout the value propositions of their companies, organization. and how they believe digitization will impacts big, strategic decisions that shape Informed decision-making transform the workforce. a company’s future. It also improves the millions of smaller decisions that employees make every day. The digital accelerator we call ubiquitous We also conducted interviews with analytics embeds analytics and informed decisions directly into the work senior human resources practitioners process, giving both executives and employees the tools to make the (for example, chief human resources best decisions in a given context and job role. In effect, every informed officers) and operational leaders worker can become the voice of the brand. at large global enterprises. This included companies from a range Informed decision-making also ensures that employees with the right of industries (including retail, expertise, diverse backgrounds, and cognitive perspectives influence manufacturing, financial services) and decisions. Companies that excel at bringing experts and diverse per- geographies (North America, Europe, spectives into the decision-making process are more successful innova- Latin America). The goal of these tors. The digital accelerator we call